Volume 43, Issue 2 - February 2008
USG Only Online
PPG Quarterly Earnings Show
PPG Industries in Pittsburgh reported record sales of $2.9 billion for the fourth quarter 2007, surpassing the prior year’s fourth quarter results of $2.5 billion by 15 percent. The company’s fourth quarter net income was $200 million, or $1.21 per share, compared to $157 million net income during the same period in 2006. The fourth quarter earnings per share from continuing operations represents a 30-percent increase over the prior year’s quarter.
Glass segment sales increased $27 million, or 10 percent, during the reported quarter. According to information from the company, this was due to improved volumes in the performance glazing and fiberglass businesses and the positive impact of stronger foreign currencies, although both were slightly offset by lower selling prices in performance glazing. Segment earnings improved by $8 million, primarily as a result of improved sales volumes offset somewhat by the impact of inflation. The impact of lower pricing was offset by higher other earnings, the company reports.
“Our strong fourth quarter results capped one of the best annual financial performances in the company’s history,” says Charles E. Bunch, chairperson and chief executive officer. “We achieved over 5-percent volume growth in the quarter, marking our best quarterly performance in three years despite a slowing economy, and each of our business segments increased sales for the quarter by at least 10 percent over the prior year.”
Bunch attributed the significant growth in sales and earnings per share to strategic actions taken to reshape the company, including its expansion in emerging regions and acquisitions intended to broaden PPG’s geographic presence. www.ppg.com
Installation Write-Downs Impact Apogee’s Third Quarter Earnings
Write-down of the three installation projects reduced earnings by $0.14 per share. Excluding this adjustment, the company reports that its operating income would have increased 17 percent and operating margin would have been 8.7 percent. Overall, the company’s revenues of $211.0 million were up 3 percent versus the strong prior-year period. Operating income was $11.8 million, down 24 percent from the prior-year period. Operating margin was 5.6 percent, compared to 7.6 percent in the prior-year period. In other significant third-quarter items, Apogee agreed to sell its 34-percent interest in the non-strategic PPG Auto Glass LLC joint venture to PPG Industries, resulting in an impairment charge of $0.11 per share. Cash proceeds of approximately $25.5 million are expected when the sale closes.
Huffer says that the company’s exit of “the non-strategic auto replacement glass industry” is a key step in its strategic repositioning to focus on its more profitable architectural business. As a result of significant third-quarter items, the outlook for fiscal year 2008 earnings from continuing operations is now $1.40 to $1.50 per share, reflecting the $0.03 per share difference between the PPG Auto Glass impairment charge and the research and development net tax benefit, two items not included in prior guidance. Strong fourth-quarter performances in other businesses are expected to make up the third-quarter shortfall in the installation business. Prior guidance was $1.43 to $1.53 per share. “Our architectural businesses, with the exception of the one installation market, have been performing well this year. Including the execution setback in the third quarter, we expect to have an architectural segment operating margin ranging from 6.4 to 6.8 percent, slightly below our prior range of 6.7 to 7.1 percent,” Huffer says. He adds, “I want to underscore that our architectural markets and backlog remain strong, and our businesses are generally operating well, giving us the ability to grow earnings 20 percent annually in fiscal years 2009 and 2010.” www.apog.com
NSG Releases Financial Results
The company recorded JPY 50.5 billion (USD 471 million) in extraordinary profits, primarily a result of the sale of its Pilkington Australia subsidiary (see August 2007 USGlass, page 26), as well as the sale of investment securities. The performance of Pilkington, which became a consolidated subsidiary in June 2006, was included in the company’s consolidated income statement from the second quarter of the previous fiscal year, leading the company’s sales, operating profits and ordinary profits to show substantial year-on-year increases in the first half. The company’s building products (BP) business, which includes glass and glazing systems for exterior and interior architectural use, achieved sales of JPY 205 billion (USD 1.9 billion) and operating income of JPY 17.5 billion (USD 163 million).
In addition, the group used its financial report as an opportunity to announce its long-term vision, to be executed in three phases. Over the next four years the company aims to create a new entity focused on differentiating itself from competitors, and maximizing productivity and operational quality while reestablishing financial foundations. Phase two will last for three years, during which the company aims to achieve “aggressive growth” in its flat glass business, expand into emerging countries; improve competitiveness, launch major new products, improve research and development and foster technologies. During the three-year-long third phase, NSG will focus on exploring new areas for further growth; exploring new businesses by leveraging both customers and technical and operational competencies; and pursuing acquisitions, mergers and alliances in related areas. www.nsg.co.jp/en
Glaston’s Profit “Unsatisfactory” For First Nine Months ’07,
But Forecast Remains Good
Consolidated net sales for the January-September period grew by 17 percent to EUR 181.0 (USD $266.8) million. Third quarter net sales were EUR 57.3 (USD $84.4) million. Operating profit for the nine months, excluding non-recurring items, was EUR 9.5 (USD $14.0) million, or 5.2 percent of net sales, while the third quarter operating profit was EUR 4.0 (USD $5.8) million, or 6.9 percent of net sales. Net sales for the Pre-Processing segment in the third quarter were EUR 20.6 (USD $30.3) million, Heat Treatment’s net sales were EUR 30.2 (USD $44.5) million and the Software Solution business’s net sales were EUR 6.8 (USD $10.0) million. The Pre-Processing business area accounted for EUR 0.3 (USD $0.4) million of the third quarter operating profit, Heat Treatment for EUR 3.2 (USD $4.7) million and Software Solutions for EUR 1.6 (USD $2.3) million. According to the interim report, the favorable development of the construction industry continued in all market areas, excluding North America where residential construction was subdued. “A slowdown of private building and financial market instability in the USA had a weakening effect on the third quarter order book for the heat treatment business area,” says Seitovirta.
In contrast with the general market situation, sales for the company’s pre-processing business developed positively in North America. In the third quarter, measures aimed at improving the efficiency of product delivery were initiated in the business area. The general North American market situation was not reflected in the software solutions business, as a number of large glass manufacturers invested in new software solutions.
The report notes that the Group has a number of programs underway to increase profitability by improving the quality of the delivery chain and enhancing operational efficiency. “The results of the efficiency measures will begin to be seen during 2008,” Seitovirta says. According to the report, the Glaston Group’s 2007 net sales and operating profit are expected to grow. The company also note in its interim report that its glass processing unit, Tamglass Glass Processing, sold its balcony glass business to Lejo Network Oy on October 1. As part of the consideration, Tamglass Glass Processing acquired a 12-percent shareholding in Lejo Network Oy. The deal included assets of the balcony glazing business, including balcony system product rights. The business operations sold account for approximately 5 percent of Glass Processing’s turnover. The deal had no impact on personnel. www.glaston.net
Vitro Reports Continued Sales Growth in Third Quarter
Asahi Glass Announces Revision of Operating Results Outlook
For the fourth quarter 2007, the company expects to sustain extraordinary losses of approximately 78.0 billion yen (USD 726 million), consisting of impairment losses on long-lived assets such as production facilities in the automotive glass business in Europe, a restructuring program and impairment losses on long-lived assets accompanying the closure of the Nakayama headquarters and plant of AGC Techno Glass Co. Ltd. and provision for the fine on the alleged anticompetitive behavior both in the flat glass and automotive glass sectors in Europe (see December 2007 USGlass, page 36). As a result, consolidated net income is estimated to fall short of the initial forecast.